BCLP Global Restructuring & Insolvency Developments

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Singularis v Daiwa: UK banks beware!

Editors’ Note:  The Global Restructuring and Insolvency Developments team of BCLP presents this very concerning opinion for any financial institution that operates in the United Kingdom.  Specifically, in Singularis Holdings Ltd (in Official Liquidation) v Daiwa Capital Markets Europe Ltd (copy of the ruling is here), the Court of Appeal (England and Wales) considered a bank’s duty, commonly known as a Quincecare duty, to protect companies from fraud by authorised officers.  Robin Ganguly and Alexandra Kirby of Bryan Cave Leighton Paisner’s London office present the GRID readers with a summary and the key takeaways of this ruling.

Key points

  • Banks (and other financial institutions) have a duty to protect companies from fraud by authorised officers although the extent of the duty will depend upon the services being provided.
  • An objective test needs to be satisfied as to whether there were reasonable grounds for the

HELOC Notes Found to be Nonnegotiable Under Florida Law

August 6, 2018

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Editors’ Note:  While we love complex restructuring and insolvency proceedings, a plain old suit on a note must be handled correctly as well (that did not happen in the case below).  Jonathon Nicol in BCLP’s Kansas City office handles credit litigation around the country with expertise.  Every aspect of commercial litigation must be studied and mastered – consider this a cautionary tale, and feel free to call Jonathon to take advantage of his mastery of these topics.  

In Third Fed. Sav. & Loan Ass’n of Cleveland v. Koulouvaris, No. 2D17-773, 2018 WL 2271112 (Fla. 2d DCA 2018), Florida’s Second District Court of appeal analyzed, in the context of trial exhibit authentication, whether the note for a home equity line of credit (“HELOC”) was negotiable.

The Second District Court of Appeal considered whether it was proper for the Pasco County, Florida trial court to involuntarily dismiss Third Federal’s claim for foreclosure of a HELOC

Circuit Split – Allowing Receiverships by Contract

“I think now that I’m older, I do think I’m the greatest receiver to ever do it.” -Randy Moss, Receiver, probably not talking about Fed. R. Civ. P. 66.

Editors’ Note: Will Easley of our Kansas City restructuring & insolvency practice knows about NFL receivers.  He also knows about the far more exciting receivers appointed under Federal Rule 66.  If you want to talk about either, or both, give him a call!

Even if you know the best receivers in the game, they cannot preserve your collateral if a court will not appoint them. In federal court, a receiver is usually only appointed when the plaintiff shows fraud or other threat to the collateral.  For creditors who have the Randy Moss (or the objectively better Jerry Rice) of receivers, and a provision allowing appointment in the loan documents, this may come as a shock. Currently, there is

Fifth Circuit Affirms Dismissal of Bankruptcy Case Due to Lack of Corporate Authority to File (and provides a blueprint for veto powers over bankruptcy filings?)

On June 14, 2018, the United States Court of Appeals for the Fifth Circuit issued a revised opinion that held that Federal law does not prevent a bona fide shareholder from exercising its right to vote against a bankruptcy petition just because it is also an unsecured creditor. In re Franchise Servs. of N. Am., Inc., 891 F.3d 198, 203 (5th Cir. 2018), as revised (June 14, 2018).

Franchise Services of North America, Inc. (“FSNA”) was once one of the largest rental car companies in North America. Id. at 203.  In 2012, FSNA desired to purchase Advantage Rent-A-Car and enlisted an investment bank, Macquarie Capital (U.S.A.), Inc. (“Macquarie”), to assist. Macquarie created a fully-owned subsidiary, Boketo, LLC (“Boketo”), to make a $15 million investment in FSNA.

In exchange for the capital infusion, FSNA gave Boketo 100% of its preferred stock in the form of a convertible preferred equity instrument.

Killjoy Bankruptcy Court Denies Debtors’ Motion to Buy Totally Boss Camaro

July 26, 2018

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Weird things happen in bankruptcy court. All you high-falutin Chapter 11 jokers out there, cruise down to the bankruptcy motions calendar one day.  You will see sovereign citizen arguments, the increasing problem of unprepared pro se claimants relying on bogus bankruptcy petition preparers, and occasionally, the subject of this post – Chapter 13 debtors seeking court authority to buy a sweet Camaro.

 

Debtors’ Counsel:  Your Honor, it has 20 inch rims!

The Court:  But is it an IROC?

 

 

 

 

In In re Jordan, the Bankruptcy Court for the Eastern District of North Carolina addressed a way righteous motion by Chapter 13 debtors to purchase a Camaro.  Not just any Camaro, but the

Ninth Circuit Declines To Decide When Contempt Sanction Becomes Punishment

Bankruptcy courts have authority to hold in civil contempt one who refuses to comply with a bankruptcy court order, including incarceration and/or daily fines until the offender complies.[1]  But when does civil contempt[2] cross into criminal contempt, which is punitive and outside the scope of the bankruptcy court’s powers?[3]  While a bright-line rule is wanting, the 9th Circuit’s silence on a recent case implied that three years of incarceration plus a $1,000 daily fine to coerce compliance does not implicate criminal due process concerns and, therefore, is within the bounds of permissible bankruptcy court authority.

Kenny G Enterprises, LLC’s Chapter 11 case (which dealt with a developer named Kenny G, and not the world’s favorite saxophonist) was converted to Chapter 7, triggering a requirement

The Primary Purpose Test and SRP Chameleon: How the Obamacare “Penalty” Became a “Tax” Only to Become a “Penalty” Again

The Patient Protection and Affordable Care Act of 2010 (a/k/a “Obamacare” or the “ACA”), with its infamous “individual mandate”[1] (and corresponding “shared responsibility payment” (which we’ll call the “SRP”)),[2] is no stranger to controversy.  Everyone is well aware of the legal challenges mounted against the individual mandate, and the seminal SCOTUS opinion upholding the mandate as a valid exercise of Congress’s taxing power – National Federation of Independent Business v. Sebelius, 567 U.S. 519 (2012). Don’t worry, we’re well aware that you, along with nearly every other American (including us here at the Bankruptcy Cave), are sick and tired of hearing about ACA squabbles.  But this post will explore one side of the ACA that you’ve almost certainly not considered, but which is interesting (to us at least).  It’s interesting because it provides the leading thought on which government exactions should and shouldn’t be

SCOTUS Reminds Us To Get It In Writing When Dealing with Someone that Owes You Money

The recent decision from the United States Supreme Court in Lamar, Archer & Cofrin, LLP v. Appling (“Lamar”), further restricts a creditor’s ability to pursue future recovery on its debt through a nondischargeability action in a debtor’s bankruptcy.  On June 4, 2018, the Court ruled in Lamar that a debtor’s false statement about a single asset must be in writing before the creditor’s debt can be excepted as nondischargeable in bankruptcy.

The Supreme Court’s full opinion can be viewed here: Lamar Opinion 2018 . The Court’s decision in Lamar resolved a circuit split and provides for consistent interpretation of the Bankruptcy Code which did not previously exist.  The issue before the Court was whether a false oral statement about a single asset can render a specific obligation nondischargeable,

Reverse Mortgage Update: New York Law Mandates New Foreclosure Notices and Certificate of Merit

Editors’ Note:  While this post is not a per se bankruptcy issue, matters on consumer financial services are always in the curtilage of bankruptcy and the U.S. Bankruptcy Code.  Our BCLP consumer financial services colleague Cathy Welker is an expert in this area, advising banks, servicers, and other financial institutions on the Byzantine regulatory world they face, not only in New York where she practices but also at the federal level.  Likewise, BCLP’s Dallas office enjoys the benefits of Greg Sachnik, a former senior banking executive deep in the front lines of TILA, RESPA, deceptive trade practices, wrongful foreclosure, and fair debt collection.  We appreciate seeing this update from them, especially as reverse mortgage issues grow exponentially – according to one study, reverse mortgage foreclosures increased by over 600 percent in recent years.  So we are pleased to re-publish it here, and for you to read

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